Sell wheat as prices increase

After the Kansas City (KC) December wheat contract price went above the $7.07 price resistance level, the contract price broke the $7.28 resistance in three days and challenged the $7.60 resistance in six days. KC December wheat prices increased from $7.05 to $7.57.

At this writing and in the last six trading days, wheat prices have increased 52 cents. It is often advantageous to sell wheat in lots across time and especially as prices are increasing rather than when prices are declining.

After the Kansas City (KC) December wheat contract price went above the $7.07 price resistance level, the contract price broke the $7.28 resistance in three days and challenged the $7.60 resistance in six days. KC December wheat prices increased from $7.05 to $7.57.

If the KC December price breaks the $7.60 resistance level, the next target price is $7.80 and then $8.05. The KC December wheat contract has price support at $7.27. If the December contract goes below $7.27, the next target price is $7.07 and then $6.87.

The wheat contract price rally started on September 25 before the USDA released the September Grain Stocks estimates. Market analysts had predicted that more wheat had been fed than the USDA had estimated. Thus, wheat stocks would be lower than previously predicted. The analysts were right.

Wheat prices also increased because of export demand, relatively high U.S. hard red winter wheat protein, and relatively low U.S. and Canadian spring wheat protein levels. Another factor is that Argentina has suspended wheat exports until January, and Argentina’s upcoming wheat production may be less than previously expected.

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Brazil normally imports Argentine wheat. Without Argentina as a supplier, Brazil has been importing, and is expected to continue to import, U.S. wheat.

In the September 26 wheat exports report, all U.S. wheat export sales were 38 percent higher than this same time last year. Hard red winter wheat export sales were 33 percent higher.

United States hard red winter wheat ending stocks for the 2013/14 marketing year are projected to be 197 million bushels compared to 343 million bushels last year and the five-year average is 337 million bushels.

All U.S. wheat ending stocks for the 2013/14 wheat marketing year are projected to be 561 million bushels compared to 718 million bushels last year, and a five-year average of 791 million bushels.

World 2013/14 marketing year ending stocks are projected to be 6.5 billion bushels compared to a five-year average of 6.9 billion bushels.

Moisture conditions for planting the 2014 hard red winter wheat crop are the best since 2010. However, moisture is still below average, and conditions are “on the dry side.”

All the information above is positive for wheat prices. Negative factors include world wheat production and world and U.S. corn production. World wheat production is projected to be a record 26.05 billion bushels compared to 24.07 billion bushels last year and a five-year average of 24.78 billion bushels.

World and U.S. 2013/14 marketing year corn production are both projected to be new records. U.S. corn production is projected to be 13.844 billion bushels compared to a five-year average of 12.2 billion bushels. World corn production is projected to be a record 37.7 billion bushels.

U.S. 2013/14 marketing year corn ending stocks are projected to be 1.86 billion bushels compared to 661 million bushels last year, and a five-year average of 1.23 billion bushels.

Just before and shortly after the USDA quarterly stocks report was released, corn prices continued to grind lower as wheat prices rallied. This indicates that wheat and corn prices are moving independently of each other.

The 2013/14 Northern Hemisphere wheat harvest is essentially complete. For hard red winter wheat prices to continue the uptrend, Southern Hemisphere wheat production needs to be equal to, or less than, expectations.

Irrespective of what happens, selling wheat in a specified percentage as prices increase is normally a sound strategy.